Product Samples: Cost-Free for Shoppers, Not Risk-Free for Vendors

Tuesday, December 11, 2018

It seems like product samples are everywhere these days:

• When you walk through a mall's food court, you're inundated with samples of food.
• When you sit down at a movie theater, you're subjected to a handful of trailers (movie samples).
• When you visit paywalled websites, you're presented with the first few sentences of various stories (article samples).

We've all encountered countless samples over our lifetimes, but few of us have ever given them much thought. Today we're going to pull back the curtains and explore the do's and don'ts of successful product sampling efforts.

Why do companies use samples in the first place?

One of the most noteworthy problems in the business world is that of information asymmetry. Sellers generally possess detailed information regarding their products' limitations, flaws, and shortcomings. Buyers, on the other hand, tend to have relatively little insight into the nature of the products available for purchase. While shoppers can conduct careful research to mitigate the effects of information asymmetry, the risk of making a poor buying decision can not be eliminated completely. In addition, research often proves quite expensive in terms of both time and effort required.

Without the benefit of samples, buyers would be forced to accept a significant degree of risk when purchasing unfamiliar items. Rather than being able to rely upon first-hand experience, shoppers would be forced to base their buying decisions upon a mishmash of dubious signals, guesswork, and third-party opinions.

Such a high degree of uncertainty would lead shoppers to become increasingly hesitant to purchase new and innovative goods unless they were heavily discounted. No one would ever feel comfortable paying full price for an item that might prove disappointing (as suggested in "The Market for Lemons").

As a result, honest vendors would be incentivized to eliminate the effects of information asymmetry in their sales processes. Two of the most powerful means of doing so are as follows:

• Increasing the quality and quantity of information available to shoppers
• Providing guarantees with respect to their products' quality and functionality

Unfortunately, neither approach would prove particularly effective without the prior existence of trust on the part of the buyer.

• When more information is made available, shoppers are forced to trust that the provided details are accurate, relevant, and holistic in nature.
• When guarantees are provided, shoppers are forced to trust that vendors will be willing and able to honor their promises.

Samples are superior to each method and require little in the way of trust on the part of consumers. This is because buyers tend to place a high degree of faith in their own judgments and first-hand experiences. After all, who could possibly know more about a potential buyer's preferences than the buyer himself? Customers may still seek out additional information to fill in gaps and serve as sources of confirmation for their beliefs, but samples can act as a powerful anchoring mechanism for a wide variety of opinions.

As an added bonus, samples are increasingly inexpensive for many (but not all) firms to provide. Given that the costs of some goods are mainly fixed in nature, the marginal cost of creating samples can prove to be incredibly low - or, in some cases, even free:

• Bakeries often provide pieces of broken cookies as samples.
• Printers often provide business cards that were rejected due to typographical errors as samples.
• Flooring vendors often provide broken bits of tiles as samples.

Not only do samples provide shoppers with information about products that are available for purchase, they also help to create bonds between buyers and sellers. Some shoppers may even go so far as to feel an increased pressure to make purchases after accepting samples, due to the Ben Franklin Effect.

Even in cases in which a seller is trusted and its products are highly regarded, samples can assist buyers in their efforts to determine which of the vendor's products provides the greatest economic utility. All things being equal, the happier a customer is with his purchase, the more likely he will be to proselytize the vendor's wares and make additional purchases in the future.

Product samples gone wrong

Based on the above, one might think that samples represent a no-risk proposition. Unfortunately, product samples don't always function as intended. Sometimes their application merely proves to be an ineffective use of resources. Occasionally they can actually deter purchases from being made at all.

Let's take a look at some of the ways in which sampling initiatives can go wrong:

Samples that aren't impressive enough

It goes without saying that vendors tend to be better off when their product samples are seen in a positive light. The appearance of unexpected problems, defects, and disagreeable characteristics generally leads to undesirable outcomes for sellers.

Just as important as the product itself, a sample's presentation must be tailored to bolster the image that each vendor is attempting to portray. A high-end vineyard, for instance, would likely see its prestige decimated should the vendor provide samples of its wines in cartoon-themed paper cups. Such samples would cause the vineyard's offerings to appear both cheap and lowbrow.

In many cases, poorly crafted samples not only damage the reputations of their manufacturers, they can even reduce the standings of items with which they are bundled. In the computer world, there's even a term for it: crapware.

Samples that are too impressive

While some companies worry about whether their samples are good enough, others find themselves with an unexpected problem: sometimes their samples are too good.

Many firms manufacture their samples with higher standards than exist for their actual products. Product samples that are intended to be tested for quality and safety (such as the cabling samples provided during the construction of the Brooklyn Bridge) often fall into this category. The results of this type of behavior may appear to be of little concern to vendors in the short term: the quality of the samples will cause the product's reputation and desirability to increase... until legions of displeased customers begin demanding refunds and launching accusations of deliberate misrepresentation.

Samples that are neither unimpressive nor overly impressive

By process of elimination, one would think that samples that are neither better nor worse than the products that they represent must be perfectly safe for businesses to offer.

Unfortunately it's not quite so simple.

One of the most unexpected dangers of samples is that of cannibalization. Sometimes samples are imbued with so much of a product's value that customers have no reason to make any purchase at all. As they say, "why buy the cow when the milk is free?" Many firms employing a freemium approach to marketing discover this fact the hard way as they pit their paid products against their free offerings.

Even in cases in which no cannibalization occurs, some unscrupulous shoppers are known for requesting and accepting samples despite having no intention of making a purchase. For some vendors, the additional cost of servicing these shoppers represents an insignificant annoyance. For others, the additional expense could represent the difference between profitability and bankruptcy.

Even the most open-minded sample recipient will find himself unswayed, should his sample fail to demonstrate the essential or implied qualities of a given product. For instance, few shoppers would find any value in receiving one of the following as samples:

• A gear from a sewing machine
• A software application that can only be run for three seconds at a time
• A video clip containing a portion of a film's closing credits
• A spoonful of salt from a bakery

Interestingly, even samples that are complete representations of the products that they advertise can prove problematic. It has been suggested, for instance, that the ever-famous Pepsi Challenge demonstrated this fact quite clearly. In small quantities, judges preferred the taste of Pepsi to Coke due to its sweeter taste. However, when those same individuals were presented with larger quantities of each, the participants overwhelmingly became displeased by Pepsi's sugary flavor. In economic terms, the small sample sizes of Pepsi belied a strongly decreasing marginal utility of sweeteners contained therein.

A bit of advice for those considering the use of samples

In general, before offering a product sample, one should consider the following:

• Corporate goals - Is the purpose of a sample to build loyalty, to attract new customers, to educate potential buyers, to reduce risk, or something else? A firm's strategic intent may radically alter the optimal nature and distribution methodology for its product samples.
• Internal costs of production - Depending upon the nature of the product and its split between fixed and variable costs, samples may be prohibitively expensive to provide on a mass-market basis. The more expensive a sample is to produce, the more important it is for its vendor to focus upon gatekeeping to ensure that resources are not wasted delivering samples to undesirable recipients.
• The close - Vendors should create a clear path between the receipt of a sample and the action which they desire shoppers to undertake. Absent explicit written prompts or more clandestine guidance, sample recipients may not take any further actions at all. As a result, vendors lacking clear calls to action may find themselves unable to capture any benefits from their sampling efforts.

Conclusion

The offering of samples is a time-honored tradition that has the potential to provide significant benefits to a wide variety of vendors.

Interestingly, many believe that samples must be explicitly labeled as such. In truth, samples often prove most effective when their presence goes unrecognized by potential buyers.

For instance, did you know that some consultants give away samples of their creative thinking and domain expertise via insightful articles? These cunning individuals often provide helpful resources in order to encourage people to buy their books, to hire them for consultative services, and even to sign up for their insightful newsletters.